Check conversion generally refers to a payment that begins with a paper check and ends as an electronic debit. The paper check may be truncated/converted into an electronic debit entry early in the check handling cycle for subsequent electronic processing. Currently, checks may be converted using Automated Clearing House (ACH) payment system, ATM networks or other mechanisms. Other clearing channels may include Image Replacement Document (IRD), image exchange, and other channels. As a result, the efficiencies of electronic payments are realized while customers still continue to write paper checks.
Currently, various electronic payments, such as automatic payroll deposits and debit card purchases, may be handled and processed. As a result, corporations and consumers can reduce or eliminate the use of paper checks to make routine and other payments. Examples of electronic payments include salaries, consumer and corporate bill payments, interest and dividends, and Social Security and other entitlement programs.
Many entities, including corporations, have been able to realize significant savings by collecting recurring consumer payment obligations by debiting consumers' bank accounts electronically after obtaining approval of the bill payer to debit his or her bank account periodically for the amount owed. A consumer or a corporation can make an electronic credit payment instead of issuing a paper check.
As more banks and other entities participate in various electronic payment systems, additional requirements may be implemented for each receiving entity. For example, different recipients may implement different mechanisms for identifying, receiving and/or processing electronic payments. Further, different banks may implement different electronic payment requirements. These inconsistencies and specific requirements may lead to errors and inefficiencies in transmitting and receiving electronic payments. Such errors and inefficiencies will inevitably lead to delays and higher costs. Currently, each settlement channel has its own settlement accounting system, resulting in various inefficiencies and duplicative efforts due to the support of multiple accounting systems.
In the credit card industry, the concept of “on-us” items refers to checks drawn on the same bank that is used by the payee to cash the check or deposit the proceeds. Payment is deposited at the same financial institution on which it was drawn or written. Thus, these items are not cleared between institutions. As a result, savings in cost, time and/or other efficiencies are realized. After a check is deposited at a local bank, the local bank may transport the check to a processing center where the checks are encoded and sorted.
Typically, a sorter is used to separate on-us documents from transit documents at a first pass. A traditional sorting process may involve a bank sorting paper checks according to individual member banks, and after the sorted checks are passed to individual member banks, the member bank further sorts the checks to support a direct send, which may include a single transmission representing a single bank's transactions. The sorter may capture MICR data and sort the documents into groups according to individual customer accounts. Thus, on-us documents may be electronically transmitted and quickly posted to a customer's account. Generally, banks receive their on-us files for posting from many different sources. For example, a bank may receive all their paper checks and/or other payment items, sort out those items they want to clear, and processes their own in-clearings. In-clearing documents are typically non on-us documents received from other banks or clearing facilities. Documents identified as transit items are generally dispatched and settled through a third party settlement agency. Third party settlement agencies may include Federal Reserve, Clearinghouse Banks, and/or other various entities and organizations that require additional time and fees. Each correspondent bank is responsible for all their own settlement functions, as well as any check image capturing, archiving, etc.
In view of the foregoing, it would be desirable to provide a method and system for settlement processing which overcome the above-described inadequacies and shortcomings.